Citi Private Bank adjusts equity allocations with eye toward end of the bull market

The head of Citi Private Bank’s global investment committee isn’t calling for an end to the bull market cycle, but he thinks he can see it from here.
“The U.S. is still an attractive equity market, but it doesn’t have the same kind of global growth acceleration it had a few years ago,” said Steven Wieting, global chief investment strategist, in explaining why he trimmed the firm’s overweight position in U.S. large-cap stocks to 2% from 3%.
The firm’s recommended allocation to equities overall was cut to a 5.5% overweight from 6%, with the balance of that adjustment going to fixed income.
“If your timeframe is the next year or 18 months, we’re not at the end of the bull market cycle yet, but I doubt we’re going to get through the rest of this decade without a significant market drop,” he said. “We foresee an ongoing U.S. recovery, only minimal Federal Reserve policy tightening and corporate earnings growth resuming.”
UNUSUALLY LONG RUN
Mr. Wieting, who has been bullish on equities since 2009, acknowledged that the bull market has enjoyed an unusually long run.
It has been more than three years since the S&P 500 Index has declined by at least 10%, which is something that historically happens about every 18 months.
So far this year, the S&P is up 3.2%, and is up 15% over the trailing 12 months. The MSCI EAFE Index is ahead 8.9% since the start of the year, and 2.1% over the trailing 12 months.
Mr. Wieting still recommends underweighting petroleum-sensitive stocks and debt markets, but he is reducing that underweight slightly “given the likelihood of a longer-term oil-price recovery and mostly falling valuations this year.”
“These moves were designed to exploit changing return opportunities through late 2016 rather than shorter-term risks that may impact our most favored markets,” he said. “Risks surrounding Greek finances and other sovereign issues remain, and may impact markets in coming months.”